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Ranger Direct ZDP - Half-year Report

Tue, 25th Sep 2018 07:03

RNS Number : 7809B
Ranger Direct Lending ZDP PLC
25 September 2018
 

HALF YEARLY FINANCIAL REPORT ANNOUNCEMENT

(Registered No. 10247619)

RANGER DIRECT LENDING ZDP PLC

FOR THE PERIOD FROM 1 JANUARY 2018 TO 30 JUNE 2018

 

CHAIRMAN'S STATEMENT

I am pleased to present the Ranger Direct Lending ZDP PLC (the "Company") Half Year Report for the period from 1 January 2018 to 30 June 2018.

The Company is a wholly owned subsidiary of Ranger Direct Lending Fund Plc ("RDLF" or the "Parent Company") and was established solely for the purpose of issuing zero dividend preference shares of GBP 0.01 each in the capital of the Company ("ZDP Shares").

Since incorporation, the Company has carried out two placings of ZDP Shares, issuing a total of 53 million ZDP Shares for aggregate gross proceeds of GBP 53.8 million. The entirety of these gross proceeds were lent to RDLF pursuant to the terms of a loan agreement between the Company and RDLF dated 25 July 2016 (the "Loan" and the "Loan Agreement"). The proceeds of the Loan are required to be utilised in accordance with RDLF's investment policy and for working capital purposes.

As a condition of the Loan Agreement, RDLF was required to grant an undertaking in favour of the Company dated 25 July 2016 (the "Undertaking") pursuant to which RDLF undertook to subscribe for such number of ordinary shares of GBP 1.00 each in the capital of the Company ("Ordinary Shares") as would be necessary (or to otherwise ensure) that the Company has sufficient funds to pay the final capital entitlement of GBP 1.2763 per ZDP Share (the "Final Capital Entitlement") to the ZDP Shareholders on 31 July 2021 (the "ZDP Repayment Date"), giving a redemption yield of 5%, on an issue price of £1.00 per ZDP Share (the "Redemption Yield").

As announced by RDLF on 6 July 2018, the Board of RDLF have commenced an orderly wind up of the company.  Plans are still currently being formulated but the intention is to dispose of RDLF's assets in an orderly manner and return shareholders' capital to them.  Any such plan will also take account of RDLF's obligations to the Company and, indirectly, ZDP shareholders and details of proposals for an orderly winding up of the Company will be published in due course. 

The key performance indicators against which the Board has reviewed the Company's performance are set out below. Most significantly, the Cover (defined below) as at 30 June 2018 was 3.18 times. From the perspective of the Directors, the Company's activities are integrated with the RDLF Group (the "Group"), for which the Half Year Report can be found on the Company's website http://www.rangerdirectlending.uk.

Brendan Hawthorne Chairman 24 September 2018

OVERVIEW

The Company was incorporated and registered in England and Wales on 23 June 2016 as a wholly owned subsidiary of RDLF. On 1 August 2016, the Company placed 30 million ZDP Shares at a placing price of GBP 1.00 per ZDP Share. The Company was admitted to the standard segment of the Official List of the UK Listing Authority and the entirety of the Company's issued ZDP Share capital was admitted to trading on the London Stock Exchange's main market for listed securities (the "Admission").

A further 23 million ZDP Shares were issued at a placing price of GBP 1.035 per Share and admitted to trading on 4 November 2016 ("Subsequent Admission").

Pursuant to the terms of the Loan Agreement, the Company loaned the entirety of the gross proceeds of the issue of ZDP Shares to RDLF upon Admission and Subsequent Admission (as applicable). As a condition of entering into the Loan Agreement, RDLF was required to grant the Company the Undertaking. In accordance with the terms of the Undertaking, RDLF is required to (among other things) subscribe for such number of Ordinary Shares in the Company as may be necessary to ensure (or to otherwise ensure) that the Company has sufficient assets to pay the Final Capital Entitlement to the ZDP Shareholders on the ZDP Repayment Date and to pay any operational costs incurred by the Company.

From the perspective of the Directors, the Company's activities are integrated with the RDLF Group (the "Group").

Principal activities

The Company is a wholly owned subsidiary of RDLF and was incorporated by RDLF for the sole purpose of issuing the ZDP Shares. The Company's only material financial obligations are in respect of the ZDP Shares. The proceeds from the issuance of the ZDP Shares were on-lent to RDLF pursuant to the Loan Agreement. These proceeds along with the obligation of RDLF, pursuant to an undertaking granted in favour of the Company to put the Company in a position to meet its obligations in respect of the ZDP Shares, form the Company's only material assets.

Objective

The objective of the Company is to provide the final capital entitlement of the ZDP Shares to the ZDP holders at the ZDP Repayment Date of 31 July 2021. The funds are managed in accordance with the investment policy of RDLF.

BOARD OF DIRECTORS

The Directors who held office during the financial period and up to the date of approval of this report were:

Brendan Hawthorne (Chairman) (independent) appointed on 26 July 2018

Mr Hawthorne has more than 20 years experience as a specialist in financial investigations and asset recovery. He has extensive multi-jurisdictional experience including acting as an independent director of substantial onshore and offshore investment funds. He is a Chartered Accountant and Certified Fraud Examiner. His forensic accounting, asset recovery and litigation experience will be especially helpful in supervising the maximisation of value from the asset recovery processes.

Jonathan Schneider (independent) appointed on 23 June 2016

Mr Schneider is a Chartered Accountant and an active entrepreneur and investor. From 2006 to 2012, he was the co-founder and managing partner of the Novator Credit Opportunities Fund, a UK based credit special situations hedge fund. He is the Executive Chairman of Capital Step a UK based mid-market lender. Mr Schneider currently has a portfolio of alternative lending interests which he actively supports and manages, the majority of which he conceived and co-founded. Some of these include Jumo, a pan African consumer finance business, Iwoca.com an SME lender (of which he is Chairman) and Mode, an emerging market airtime credit provider. Mr Schneider has held numerous previous directorships, including serving as Director on the Board of publicly listed Talon Metals Inc. and Aqua Online Limited.

 

Christopher Waldron (Chairman) (independent) appointed on 23 June 2016, resigned on 19 June 2018

Dr Matthew Mulford (independent) appointed on 23 June 2016, resigned on 19 June 2018

 

INTERIM MANAGEMENT REPORT AND DIRECTORS' RESPONSIBILITY STATEMENT

 

For the period from 1 January 2018 to 30 June 2018

 

Cautionary Statement

This interim management report has been prepared solely to provide additional information to Shareholders to assess the strategies of the Company. The interim management report should not be relied upon by any other party or for any other purpose.

 

The interim management report contains certain forward looking statements. These statements are made by the Directors in good faith based on the information available to them up to the time of their approval of this report but such statements should be treated with caution due to the inherent uncertainties, including both economic and business risk factors, underlying any such forward-looking information.

 

 

Going concern

The RDLF Board has announced its intention to dispose of its assets in an orderly manner and return shareholders' capital to them and adequately reimburse the ZDP shareholders by the end of March 2020.

 

Given these developments and the intention to wind down the Company, the use of the going concern basis in preparing the financial statements of the Group is not appropriate.  As such the financial statements have been prepared on a basis other than that of a going concern.  There were no adjustments made to the carrying values of the assets and liabilities of the Group as a result of this change in the basis of preparation. 

 

The Directors believe that the Company and Group have adequate resources to continue in operational existence until the anticipated liquidation of the Company.   The RDLF Board will ensure that sufficient liquidity is held back at all times to ensure all liabilities, including those to ZDP shareholders are at all times adequately covered.

 

 

Principal risks and uncertainties

Due to the Company's dependence on RDLF to repay the loan and provide any contribution to meet the final capital entitlement of the ZDP shareholders, the principal risk faced by the Company is the credit risk posed by the Loan Agreement and RDLF's ability to perform its obligations under the Undertaking. The Board carried out a robust assessment of this risk. The specific risks faced by RDLF are described in its 2017 annual report, which include: macroeconomic risks, operational, legal and compliance risks, investment risks, taxation risks, cyber security risks and an update on any effect of Brexit.

In addition, the Company is also focused on the following principal risks:

 

Principal risk

Mitigation

Link to KPI

Final capital entitlement

RDLF's debt to the Company pursuant to the Loan Agreement and RDLF's obligations under the Undertaking will rank behind any secured creditors of RDLF therefore it is not guaranteed that the final capital entitlement will be paid.

 

To protect the interests of ZDP Shareholders, the Undertaking contains the following restrictions:

·     Group incurring any bank borrowings which would exceed an amount equal to the sum of:

(a)   20% of the prevailing Net Asset Value attributable to the RDLF Ordinary Shares in issue as at 1 August 2016; plus

(b)   an amount equal to 50% of the net proceeds of any issue of RDLF C Shares.

 

·     RDLF making any distribution of capital or income, other than any such distribution which:

(a)   is required to maintain RDLF's status as an investment trust; or

(b)   would not reduce the Cover of the ZDP Shares below 2.75 times immediately after the distribution has been made.

 

Cover

   

Important events and Financial performance

The Board reviews the performance of the Company by reference to a number of key performance indicators ("KPIs") and considers that the most relevant KPIs in assessing the Company's success towards achieving its objective are as follows:

·      Cover - measures the ability of RDLF to meet the Company's final capital entitlement based on RDLF's net asset value;

·      Accrued capital entitlement - represents the Company's liability per ZDP share. As at 31 December 2017, the total accrued capital entitlement is £57,801,660 (see below); and

·      Share Price of ZDP Shares - the price at which each ZDP share can be sold in the London Stock Exchange.

The ZDP Shares' Cover as at 30 June 2018 was 3.18 times (31 December 2017: 3.19 times).

As at 30 June 2018, the capital entitlement which had accrued on the ZDP Shares was GBP 1.0906  per ZDP Share (31 December 2017: GBP 1.0634 per ZDP Share). The Final Capital Entitlement is GBP 1.2763 per ZDP Share (payable on the ZDP Repayment Date).

The ZDP Shares carry no right to income and the whole of their return, therefore takes the form of capital. The Redemption Yield of the ZDP Shares is 5% per annum based on an issue price of GBP 1.00 per ZDP Share and is deemed to accrue daily and is compounded annually from 1 August 2016 up to (but excluding) the ZDP Repayment Date. The Final Capital Entitlement will rank in priority to the capital entitlement of RDLF's ordinary shares, however, the Loan made by the Company to RDLF is unsecured and therefore the Company will rank behind any secured creditors of RDLF. As such, there can be no guarantee that the Final Capital Entitlement will be paid.

 

Date

Share Price of ZDP Shares

IPO

1.000

31/08/2016

1.063

30/09/2016

1.071

31/10/2016

1.070

30/11/2016

1.068

29/12/2016

1.045

27/01/2017

1.060

28/02/2017

1.050

31/03/2017

1.043

28/04/2017

1.035

31/05/2017

1.010

30/06/2017

1.005

31/07/2017

1.013

31/08/2017

1.018

29/09/2017

1.048

31/10/2017

1.041

30/11/2017

1.020

29/12/2017

1.019

31/01/2018

1.070

28/02/2018

1.065

28/03/2018

1.050

30/04/2018

1.061

31/05/2018

1.075

30/06/2018

1.106

 

Cover of the ZDP Shares shall represent a fraction where the numerator is equal to the Net Asset Value of RDLF and its Group on a consolidated basis adjusted to: (i) add back any liability to ZDP Shareholders; and (ii) deduct the estimated liquidation costs of the Company, and the denominator is equal to the amount which would be paid on the ZDP Shares as a class (and on all ZDP Shares ranking as to capital in priority thereto or pari passu therewith, save to the extent already taken into account in the calculation of the Net Asset Value) in a winding up of the Company on the ZDP Repayment Date. Share price taken from Bloomberg Professional.

There can be no assurance that the Final Capital Entitlement of the ZDP Shares will be repaid in full on the ZDP Repayment Date.

 

Further KPIs for the parent company can be found in RDLF's annual report. The Company's market capitalisation as of 30 June 2018 was GBP 57.770 million (31 December 2017: GBP 53.994 million) based on 53,000,000 ZDP Shares at a Share Price of 109.00 pence (31 December 2017: 101.875 pence) per ZDP share.

Related party transactions

Related party transactions are disclosed in note 11 to the condensed financial statements.

Directors and Share Interests

The Directors who served during the period, all of whom are non-executive and were (unless otherwise stated) appointed, with effect from incorporation on 23 June 2016, were as follows:

·     Brendan Hawthorne (Chairman), was appointed after the period under review on 26 July 2018

·     Jonathan Schneider

·     Christopher Waldron (Chairman), resigned 19 June 2018

·     Dr Matthew Mulford, resigned 19 June 2018

Each Director is non-executive and since the Directors of the Company are also RDLF Directors, they are considered to be non-independent Directors of the Company; however in their capacity as Directors of RDLF, each is considered to be independent. Biographies of each Director are set out above, and demonstrate the wide range of skills and experience each brings to the Board.

A formal performance evaluation of the RDLF Board and its committees has been carried out and the RDLF Board considers that all of the Directors contribute effectively and have the skills and experience relevant to the future leadership and direction of RDLF. The Board has not undertaken a separate formal appraisal process of its own operations as these processes were covered by the appraisals carried out by the RDLF board.

The appointment and replacement of Directors is governed by the Articles of Association ("Articles"), the Companies Act 2006 and related legislation. The Articles themselves may be amended by a special resolution in a general meeting and at a class meeting of the ZDP Shareholders.

During the period, no Director had a material interest in a contract to which the Company was a party (other than their own letter of appointment), requiring disclosure under the Act. There have been no loans or guarantees from the Company to any Director at any time during the period or thereafter.

No Directors have any interests in the Company's Ordinary or ZDP Shares. There have been no changes to this since 30 June 2018.

 

 

DIRECTORS' RESPONSIBILITY STATEMENT

 

We confirm that to the best of our knowledge:

a) the condensed financial statements ("condensed financial statements") have been prepared in accordance with IAS 34 'Interim Financial Reporting' as adopted by the European Union;

b) the interim management report includes a true and fair review of the information required by the Disclosure Guidance and Transparency Rules ("DTR") 4.2.7R (indication of important events during the first six months of the current financial year and their impact on the condensed financial statements; and a description of principal risks and uncertainties for the remaining six months of the year); and

c) the interim management report includes a true and fair review of the information required by DTR 4.2.8R (disclosure of related parties' transactions and any changes in the related party transactions described in the last annual report that could do so).

On behalf of the Board

Brendan Hawthorne Chairman 24 September 2018

 

CONDENSED STATEMENT OF FINANCIAL POSITION

AS AT 30 JUNE 2018                                                                              

 

 

 

 

 

 

 

(Unaudited)

(Audited)

 

 

30 Jun 2018

31 Dec 2017

 

Notes

(GBP)

(GBP)

ASSETS

 

 

 

Non-current assets

 

 

 

Loan and receivables

3

                55,134,316

                54,595,547

Total non-current assets

 

                55,134,316

                54,595,547

 

 

 

 

Current assets

 

 

 

Prepayments

 

                            -

                         170

Cash and cash equivalents

 

                       50,000

                       50,000

Total current assets

 

                       50,000

                       50,170

TOTAL ASSETS

 

                54,184,316

                54,645,717

 

 

 

 

Non-current liabilities

 

 

 

Zero Dividend Preference Shares

4

                57,801,663

                56,360,557

Total non-current liabilities

 

                57,801,663

                56,360,557

 

 

 

 

Current liabilities

 

 

 

Income tax liability

 

                     308,405

                       214,799

Accrued expenses and other liabilities

 

                       46,986

                       42,839

Total current liabilities

 

                     355,391

                       257,638

TOTAL LIABILITIES

 

                58,157,054

                56,618,195

NET LIABILITIES

 

                (2,972,738)

                     (1,972,478)

 

 

 

 

SHAREHOLDERS' EQUITY

 

 

 

Capital and reserves

 

 

 

Called-up share capital

5

                       50,000

                       50,000

Capital contribution

3

                     712,738

                     670,946

Accumulated losses

 

                (3,735,476)

                   (2,693,424)

TOTAL SHAREHOLDERS' DEFICIT

 

                (2,972,738)

                     (1,972,478)

The accompanying notes below are an integral part of these financial statements.

The financial statements for the period from 1 January 2018 to 30 June 2018 of Ranger Direct Lending ZDP Plc, a public company limited by shares and incorporated in England and Wales with registered number 10247619, were approved and authorised for issue by the Board of Directors on 24 September 2018.

Signed on behalf of the Board of Directors  

 

Brendan Hawthorne

Chairman

 

 

CONDENSED STATEMENT OF COMPREHENSIVE INCOME

FOR THE PERIOD FROM 1 JANUARY 2018 TO 30 JUNE 2018

 

 

 

 

 

 

 

(Unaudited)

(Unaudited)

 

 

1 Jan to 30 Jun 2018

1 Jan to 30 Jun 2017

 

 

(GBP)

(GBP)

 

Notes

 

 

Income

 

 

 

Investment income

3

             538,769

528,205

 

 

             538,769

528,205

Expenses

 

 

 

Company secretarial, administration and registrar

 

                (33,516)

                (33,953)

Audit fees

12

                (10,400)

                (12,800)

Legal fees

 

                  -

                (1,500)

Other operating expenses

 

                  (2,197)

                  (4,699)

Total expenses

 

              (46,113)

52,952

Result from operating activities

 

                492,656

                475,253

 

 

 

 

 

 

 

 

Finance costs

 

(1,441,103)

(1,369,437)

Total finance costs

 

           (1,441,103)

(1,369,437)

 

 

 

 

Loss before tax

 

           (948,447)

(894,184)

Tax

6

              (93,605)

(95,050)

Loss after tax and total comprehensive loss for the period

 

           (1,042,052)

(989,234)

 

 

 

 

Basic and Diluted Loss Per Ordinary Share

9

                  (20.84)

                  (19.78)

 

Other comprehensive income 

There were no items of other comprehensive income in the current period and prior period therefore the loss for the period an prior period are also the total comprehensive loss for the period and prior period.

The accompanying notes below are an integral part of these financial statements.

 

 

CONDENSED STATEMENT OF CHANGES IN SHAREHOLDERS' DEFICIT

FOR THE PERIOD FROM 1 JANUARY 2018 TO 30 JUNE 2018

 

 

Notes

Called-up share capital

Capital contribution

Accumulated losses

Total

 

 

(GBP)

(GBP)

(GBP)

(GBP)

Balance at 1 January 2017

 

50,000

529,407

(655,441)

(76,034)

Capital contribution during the period

 

-

85,311

-

85,311

Loss after tax and total comprehensive loss for the period

 

-

-

(989,234)

(989,234)

Balance at 30 June 2017

 

50,000

614,718

(1,644,675)

(979,957)

 

 

 

 

 

 

 

 

 

 

 

 

 

Notes

Called-up share capital

Capital contribution

Accumulated losses

Total

 

 

(GBP)

(GBP)

(GBP)

(GBP)

Balance at 1 January 2018

 

50,000

670,946

(2,693,424)

(1,972,478)

Capital contribution during the period

 

-

41,792

-

41,792

Loss after tax and total comprehensive loss for the period

 

-

-

(1,042,052)

(1,042,052)

Balance at 30 June 2018

 

50,000

712,738

(3,735,476)

(2,972,738)

The accompanying notes below are an integral part of these financial statements.

 

CONDENSED STATEMENT OF CASH FLOWS FOR THE PERIOD FROM 1 JANUARY 2018 TO 30 JUNE 2018

 

 

 

 

 

 

 

(Unaudited)

(Unaudited)

 

 

1 Jan to 30 Jun 2018

1 Jan to 30 Jun 2017

 

 

(GBP)

(GBP)

 

 

 

 

Cash flows from operating activities

 

 

 

Loss before tax

 

(948,447)

(894,184)

Adjustments for:

 

 

 

Investment income

 

(538,769)

(528,205)

Finance costs

 

1,441,103

1,369,437

Operating cash flows before movements in working capital

 

(46,113)

(52,952)

Decrease in prepayments

 

170

1,758

Increase/(decrease) in accrued expenses and other liabilities

 

4,151

(34,117)

Net cash flows used in operating activities

 

(41,792)

(85,311)

Financing activities

 

 

 

Capital contributions

 

41,792

85,311

Net cash flows from financing activities

 

41,792

85,311

Net change in cash and cash equivalents

 

-

-

Cash and cash equivalents at the beginning of the period

 

50,000

 

50,000

Cash and cash equivalents at the end of the period

 

50,000

50,000

 

The accompanying notes below are an integral part of these financial statements.

The proceeds from the ZDP Shares issued by the Company during the prior period (see note 4) and capital contribution by RDLF were credited directly to RDLF under the Loan Agreement (see note 3) and as a result neither transaction resulted in cash flows within the Company.

 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE PERIOD FROM 1 JANUARY 2018 TO 30 JUNE 2018

1.       GENERAL INFORMATION

Ranger Direct Lending ZDP plc ("ZDP" or the "Company") was incorporated and registered in England and Wales on 23 June 2016 as a wholly owned subsidiary of Ranger Direct Lending Fund Plc ("RDLF") and with a limited life of up to 31 July 2021, unless extended by the passing of a special resolution of the Company. On 1 August 2016, the Company was subsequently admitted to the standard segment of the Official List of the UK Listing Authority and its zero dividend preference shares of GBP 0.01 each (the "ZDP Shares") were admitted to trading on the London Stock Exchange's main market for listed securities.

The half year results for the six months ended 30 June 2018 have neither been audited nor reviewed by the Company's auditor. The comparative figures for the period from 1 January 2017 to 31 December 2017 have been extracted from the Company's 31 December 2017 financial statements and do not constitute statutory accounts as defined in section 434 of the Companies Act 2006. Those financial statements have been delivered to the Registrar of Companies and included the report of the auditor which was unqualified and did not note attention to any matters by way of emphasis.  The auditor's report did not contain a statement under either section 498(2) or 498(3) of the Companies Act 2006.

2.       SIGNIFICANT ACCOUNTING POLICIES

Basis of accounting and preparation                                                

These financial statements have been prepared in compliance with applicable International Financial Reporting Standards ("IFRS") as adopted by the European Union ("EU") and have been prepared on a historical cost basis. There are no new standards or amendments to standards effective for the period presented that have a material impact on the Company.

Going concern

The RDLF Board has announced its intention to dispose of its assets in an orderly manner and return shareholders' capital to them and adequately reimburse the ZDP shareholders by the end of March 2020. 

Given these developments and the intention to wind down the Company, the use of the going concern basis in preparing the financial statements of the Group is not appropriate.  As such the financial statements have been prepared on a basis other than that of a going concern.  There were no adjustments made to the carrying values of the assets and liabilities of the Group as a result of this change in the basis of preparation. 

The Directors believe that the Company and Group have adequate resources to continue in operational existence until the anticipated liquidation of the Company.   The RDLF Board will ensure that sufficient liquidity is held back at all times to ensure all liabilities, including those to ZDP shareholders are at all times adequately covered.

New Accounting Standards, amendments to existing Accounting Standards and/or interpretations of existing Accounting Standards (separately or together, "New Accounting Requirements") not yet adopted

In the Directors' opinion, except for the application of the New Accounting Requirements referred to below, all non-mandatory New Accounting Requirements are either not yet permitted to be adopted, or would have no material effect on the reported performance, financial position or disclosures of the Company and consequently neither have been adopted.

IFRS 9 - "Financial Instruments" (Replacement of IAS 39 - "Financial Instruments: Recognition and Measurement")

IFRS 9 addresses the recognition, classification and measurement of financial assets and financial liabilities and may be adopted to replace IAS 39.

IFRS 9 requires financial assets to be classified into the following measurement categories: (i) those measured at fair value through profit or loss; (ii) those measured at fair value through other comprehensive income; and, (iii) those measured at amortised cost.

The determination is made at initial recognition. Unless the option to designate a financial asset as measured at fair value through profit or loss is applicable, the classification depends on the entity's business model for managing its financial instruments and the contractual cash flow characteristics of the instrument. IFRS 9 also replaces the "incurred loss" model in IAS 39 with an "expected credit loss" model for the measurement of impairment loss. The new model applies to financial assets that are not measured at fair value through profit or loss. IFRS 9 also introduces a new hedge accounting model.

For financial liabilities, the standard retains most of the IAS 39 requirements. The main change is that, in cases where the fair value option is taken for financial liabilities, the part of a fair value change due to an entity's own credit risk is recorded in other comprehensive income rather than the income statement, unless this creates an accounting mismatch.

Upon adoption of IFRS 9, the loan and receivables and zero dividend preference shares continues to be classified and accounted for at amortised cost. The Directors believe that the 12 month credit risk of ZDP is minimal or effectively zero given the level of cover.

Impairment

IFRS 9 replaces the "incurred loss" model in IAS 39 with an "expected credit loss" model in the measurement of impairment loss. The overall effect of the change from IAS 39 to IFRS 9 is that the assessment of impairment loss is intended to be more forward looking under IFRS 9. At initial recognition, an impairment allowance is required for expected credit losses ("ECL") resulting from possible default events within the next 12 months. When an event occurs that increases the credit risk of the counterparty, an allowance is required for ECL for possible defaults over the term of the financial instrument. The change in credit risk of the counterparty will also have an impact of income on the financial asset.

The following table summarises the change in ECL and basis of interest income recognition based on the 'stage of the financial assets.

 

 

ECL

 

Basis for calculating interest income

Stage 1 - no change in credit risk

 

12 months

 

Gross outstanding principal

Stage 2 - significant increase in credit risk but not yet defaulted

Lifetime

 

Gross outstanding principal

Stage 3 - default

 

Lifetime

 

Principal less impairment

The impairment requirements of IFRS 9 apply to the Company's loan and receivables, the Directors deemed the effect of adoption to be immaterial.

While cash and cash equivalents are also subject to the impairment requirements of IFRS 9, the identified impairment loss was also immaterial.

Use of estimates, judgements and assumptions

The following are the areas of particular significance to the Company's financial statements and include the use of estimates and the application of judgement, which is fundamental to the preparation of these financial statements. Actual results could differ from those estimates.

Critical judgements in applying the accounting policies - loan and borrowings at amortised cost

The Company accounts for the Loan and ZDP Shares at amortised cost on the basis that they have fixed or determinable payments. The effective interest rate method has been applied in calculating the income and expense during the year.

Critical judgements in applying the accounting policies - interest rate on Intercompany Loan

The Company entered into a Loan Agreement with its parent company which is subject to an interest rate of 2% compounded annually as disclosed in note 3. This interest rate compared to the ZDP Shares' interest rate of 5% compounded annually could result in a potential transfer pricing issue which is often complex and requires significant judgement.

RDLF has engaged a third party advisor to provide transfer pricing advice concerning the arm's length interest rate payable on the Loan Agreement between the Company and RDLF. The 2% interest rate has been determined to be reasonable by demonstrating the commercial effect for the RDLF group over the 5-year period; identifying comparable transactions; performing interest rate benchmarking analysis; and reviewing third party commitment lending interest at a rate lower than the 5%. Therefore in preparing these financial statements, the Directors considered using a 2% interest rate on the intercompany loan to be a reasonable estimate of an arm's length rate of interest.

Functional and presentation currency

The financial statements are presented in Pounds Sterling ("GBP"), the currency of the primary economic environment in which the Company operates, the Company's functional currency.

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency using the exchange rate prevailing at the reporting date.

Financial instruments at amortised cost - Loan and receivables and Zero Dividend Preference Shares

These are initially recognised at cost, being the fair value of the consideration received or paid associated with the loan or borrowing net of direct issue costs. Loan and receivables and ZDP Shares are subsequently measured at amortised cost using the effective interest method. The effective interest method calculates the amortised cost by allocating interest over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts or payments (including all fees paid or received that form an integral part of the effective interest rate) through the expected life of the loan or borrowing to the net carrying amount on initial recognition.

Direct issue costs are deducted from the carrying amount and amortised using the effective interest method.

Impairment of assets

Financial assets are assessed for indicators of impairment at each reporting date. Financial assets are impaired where objective evidence exists that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the financial assets have been negatively impacted.

Taxation

The current tax payable is based on the taxable profit for the period. Taxable profit differs from net profit or loss as reported in the Statement of Comprehensive Income because it excludes items of income or expense that are taxable or deductible in other periods and it further excludes items that are never taxable or deductible. The Company's liability for current tax is calculated using tax rates that have been enacted or substantively enacted at the reporting date.

Deferred tax is the tax expected to be payable or recoverable on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the liability method. Deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised.

Deferred tax is calculated at the tax rates that are expected to apply in the year when the liability is settled or the asset is realised based on tax rates that have been enacted or substantively enacted at the reporting date. The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Organisation costs

Organisation costs are expensed as incurred.

Capital contribution

Capital contributions from the parent company to meet current and future obligations of the Company are recognised directly in equity based on the value of expenses paid for by the parent company, in accordance with the Undertaking.

Investment income

Investment income is recognised when it is probable that the economic benefits will flow to the Company and the amount of revenue can be measured reliably. Income for interest bearing financial instruments is recognised on an accruals basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset's net carrying amount on initial recognition.

Segmental reporting

The Directors perform regular reviews of the operating results of the Group as a whole and make decisions using financial information at the Group level. The Board of Directors is of the view that the Company is only engaged in one business segment.

Expenses

All operating expenses of the Company are paid by RDLF pursuant to the Undertaking.

Cash and cash equivalents

Cash and cash equivalents include cash at bank and in hand and highly liquid interest-bearing securities with original maturities of three months or less from the date of acquisition.

Earnings per share

The Company presents basic and diluted earnings per share ("EPS") data for its Ordinary Shares. Basic EPS is calculated by dividing the profit or loss attributable to Ordinary Shareholders by the weighted average number of ordinary shares outstanding during the period. The diluted EPS is the same as the Basic EPS as there is currently no arrangement which could have a dilutive effect on the Company's Ordinary Shares.

3.   LOAN AND RECEIVABLES

 

 

(Unaudited)

(Audited)

 

30 Jun 2018

31 Dec 2017

 

(GBP)

(GBP)

Opening balance

           54,595,547

                  

  53,525,047  

Investment income during the period/year

538,769

1,070,500

Closing balance

55,134,316

54,595,547

Intercompany Loan Agreement

On 25 July 2016, the Company entered into a Loan Agreement with its parent company. Pursuant to the Loan Agreement, the Company immediately following the Admission and Subsequent Admission lent the entirety of the gross proceeds of each issue of ZDP Shares to its parent company, RDLF, which RDLF has applied towards making investments in accordance with its investment policy and working capital purposes. The costs associated with the issue of the ZDP Shares amounted to GBP 598,552, and were paid by RDLF.

The loan is subject to an interest rate of 2% per annum, compounding on each anniversary of the date of Admission on 1 August 2016 and repayable on the earlier of: the date falling three business days before the ZDP Repayment Date (see note 4); or in an event of default; or on demand by the Company. The Directors of the Company have no intention to demand repayment of the Loan in the next 12 months.

Deed of Undertaking

The Company also entered into the Undertaking on 25 July 2016 pursuant to    which RDLF undertook to (among other things) subscribe for such number of Ordinary Shares in the capital of the Company as may be necessary or to otherwise ensure that the Company has sufficient assets to pay the Final Capital Entitlement to the ZDP Shareholders on the ZDP Repayment Date and to pay any operational costs incurred by the Company.

During the period, the parent company contributed GBP 41,792 (31 December 2017: GBP 175,280) to the Company. The total capital contribution by the parent company as at 30 June 2018 amounted to GBP 746,479 (31 December 2017: GBP 704,687).

4.   ZERO DIVIDEND PREFERENCE SHARES

 

 

 

 

 

(Unaudited)

(Audited)

 

31 Jun 2018

31 Dec 2017

 

(GBP)

(GBP)

Opening balance

 

56,360,557

 

53,563,069

Amortisation of issue costs during the period/year

  136,175

230,155

Amortisation of premium during the period/year

(74,884)

(138,437)

Accrued interest during the period/year

1,379,815

2,705,770

Closing balance

57,801,663

56,360,557

 

Under the Company's Articles of Association, the Directors are authorised to issue up to 55,000,000 ZDP Shares for a period of 5 years from 25 July 2016. On 1 November 2016, the Company passed a resolution to authorise the Directors to issue up to 75,000,000 ZDP Shares, such authority to expire on 26 July 2021, unless revoked sooner or varied by the Company in a general meeting.

On 1 August 2016, the Company issued 30,000,000 ZDP Shares at GBP 0.01 each at a placing price of GBP 1.00 per ZDP Share. Subsequently on 4 November 2016, the Company issued a further 23,000,000 ZDP Shares at a placing price of GBP 1.035 each per ZDP share.

The ZDP Shares will have a final capital entitlement of GBP 1.2763 per ZDP share on 31 July 2021, being the ZDP Repayment Date. Accordingly, the aggregate Final Capital Entitlement payable to the holders of all the ZDP Shares currently in issue on the ZDP Repayment Date is GBP 67,643,900.

5 There can be no assurance that the Final Capital Entitlement of the ZDP Shares will be repaid in full on the ZDP Repayment Date.

Rights Attaching to the ZDP Shares

The ZDP Shares carry no right to receive dividends or other distributions out of revenue or any other profits of the Company.

The ZDP Shares carry the right to vote as a class on certain proposals which would be likely to materially affect their position. Further ZDP Shares (or any shares or securities which rank in priority to or pari passu with the ZDP Shares) may be issued without the separate class approval of the ZDP Shareholders provided that the Directors determine that the ZDP Shares would have a Cover of not less than 2.75 times immediately following such issue.

Voting Rights of ZDP Shares

The ZDP Shares carry no right to attend or vote at general meetings of the Company.

On a vote on a resolution on a show of hands at a class meeting of the holders of ZDP Shares other than in respect of a ZDP Recommended Resolution or a ZDP Reconstruction Resolution (in each case as defined in the Company's Articles), each member present in person (and every proxy present who has been duly appointed by one or more members entitled to vote on the resolution) has one vote. A proxy has one vote for and one vote against the resolution if the proxy has been duly appointed by more than one member entitled to vote on the resolution, and the proxy has been instructed by one or more of those members to vote for the resolution and by one or more other of those members to vote against. On a vote on a resolution on a poll taken at a class meeting, every member has one vote in respect of each share held by him. All or any of the voting rights of a member may be exercised by one or more duly appointed proxies but where a member appoints more than one proxy, this does not authorise the exercise by the proxies taken together of more extensive voting rights than could be exercised by the member in person.

Any vote on any ZDP Reconstruction Resolution or ZDP Recommended Resolution shall be by means of a poll. At a class meeting of the holders of the ZDP Shares in respect of a ZDP Recommended Resolution or a ZDP Reconstruction Resolution, each holder of ZDP Shares present in person or by proxy shall, on a poll, have such number of votes in respect of each ZDP Share held by him (including fractions of a vote) that the aggregate number of votes cast in favour of the resolution is four times the aggregate number of votes cast against the resolution. Each member present in person or by proxy and entitled to vote, who votes against such resolution shall on a poll have one vote for each ZDP Share held by him; provided that, if any term of any offer or arrangement to which the resolution relates shall (as regards any one or more members) have been breached in any material respect of which the chairman of the relevant meeting has written notice prior to the commencement of such meeting then, notwithstanding anything in the Articles to the contrary, each member shall, at any such meeting at which such shareholder is present in person or by proxy, and entitled to vote, on a poll have one vote for every such ZDP Share held by him.

Variation of Rights and Distribution on Winding Up

On a return of capital, whether on a winding up or otherwise, the holders of ZDP Shares shall be entitled to receive, in priority to any amounts paid to the holders of Ordinary Shares, an amount equal to the initial capital entitlement of GBP 100 pence per share as increased at such rate as accrues daily and compounds annually to give an entitlement to GBP 1.2763 on 31 July 2021, the first such increase to be deemed to have occurred on 1 August 2016 and the last to occur on 30 July 2021.

5.   SHARE CAPITAL

AUTHORISED:

Limited number of Ordinary Shares

10,000,000 Ordinary Shares

 

ISSUED AND FULLY PAID:

 

 

 

 

(Unaudited)

(Audited)

 

30 Jun 2018

31 Dec 2017

 

(GBP)

(GBP)

50,000 Ordinary Shares at GBP 1.00 each

                  50,000

             50,000

 

 

 

The Company's 50,000 Ordinary Shares were issued to its parent company on 23 June 2016.

It is not intended that any dividend will be paid to the holders of Ordinary Shares prior to the ZDP Repayment Date.

Voting Rights of Ordinary Shares

Subject to any rights or restrictions attached to any shares, on a show of hands every ordinary shareholder present in person has one vote and every proxy present who has been duly appointed by a shareholder entitled to vote has one vote, and on a poll every shareholder (whether present in person or by proxy) has one vote for every share of which he is the holder. A shareholder entitled to more than one vote need not, if he votes, use all his votes or cast all the votes he uses the same way. In the case of joint holders, the vote of the senior holder who tenders a vote, whether in person or by proxy, shall be accepted to the exclusion of the vote of the other joint holders, and seniority shall be determined by the order in which the names of the holders stand in the Register.

Variation of Rights and Distribution on Winding Up for Ordinary Shares

On a return of capital, whether on a winding up or otherwise, after the amounts payable to the holders of ZDP Shares have been satisfied in full, each Ordinary Share carries the right to a repayment of capital of up to GBP 1.00 paid up capital and the Ordinary Shares all rank pari passu as respects distributions of any surplus remaining after all such capital has been repaid.

6.   TAX

 

 

(Unaudited)

(Unaudited)

 

1 Jan to 30 Jun 18

1 Jan to 30 Jun 2017

 

(GBP)

(GBP)

Corporation tax:

 

 

Current

93,605

95,050

Deferred tax

-

-

Total tax expense for the period/year

93,605

95,050

 

The Company's tax charge for the period can be reconciled to the loss in the statement of comprehensive income as follows:

 

 

(Unaudited)

(Unaudited)

 

1 Jan to 30 Jun 18

1 Jan to 30 Jun 2017

 

(GBP)

(GBP)

Loss before tax on continuing operations

(948,447)

(894,184)

Tax effect at the UK corporation tax rate of 19%/20%

(180,205)

(178,837)

Tax effect of expenses that are not deductible in determining taxable profit

273,810

273,887

Tax expense for the period/year

93,605

95,050

 

7.   CAPITAL MANAGEMENT

The Board's policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence. The Company's capital is represented by the ordinary shares and capital contribution from the parent company. Pursuant to the Undertaking granted by RLDF in favour of the Company, RDLF undertook to (among other things) subscribe for such number of Ordinary Shares in the capital of the Company as may be necessary or to otherwise ensure that the Company has sufficient assets to pay the total amount repayable to the ZDP Shareholders and pay any operational costs incurred by the Company.

The Company is not subject to externally imposed capital requirements.

8.   FINANCIAL RISK MANAGEMENT

The Board of Directors has overall responsibility for the oversight of the Company's risk management framework.  The objective of the Company is to provide the Final Capital Entitlement of the ZDP Shares to the ZDP holders at the redemption date. Due to the Company's dependence on RDLF to repay the loan and provide contribution to meet the final capital entitlement of the ZDP Shareholders, the risks faced by the Company are considered to be the same as for RDLF.

The Company has exposure to the following risks from its use of financial instruments:

 

-     Credit risk

-     Liquidity risk

-     Interest rate risk

All short-term financial instruments have been excluded from the following disclosures.

Credit risk

Credit risk is the risk of financial loss to the Company if a counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Loan Agreement and the obligation of RDLF under the Undertaking to subscribe for such number of Ordinary Shares or otherwise ensure that the Company is able to pay the Final Capital Entitlement to ZDP Shareholders on the ZDP Repayment Date. RDLF's credit risk is the risk of financial loss if a counterparty to a debt instrument fails to meet its contractual obligations. RDLF and its investment manager seek to mitigate RDLF's credit risk by actively monitoring RDLF's portfolio of debt instruments and the credit quality of the underlying borrowers. RDLF's investment strategy allows it to potentially reduce risk through investment diversification while also potentially achieving higher returns by investing in high yielding direct lending asset classes.

Liquidity risk

 

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The most significant cash outflow consists of the payment of the Final Capital Entitlement to the ZDP holders at the ZDP Repayment Date of 31 July 2021. The Company's exposure to liquidity risk depends upon RDLF's ability to meet all current and future obligations of the Company. The Directors consider RDLF's compliance with the Undertaking and the capital contributions received as sufficient.

The contractual undiscounted maturity profile of the Company's financial assets and liabilities is as follows:

 

 

(Unaudited)

(Audited)

 

 30 June 2018

   31 Dec 2017

 

(GBP)

(GBP)

In more than one year but not more than five years:

 

 

Loan and receivables

58,610,638

58,610,638

 

 

 

Zero Dividend Preference Shares

(67,643,347)

(67,643,347)

 

Interest rate risk

Interest rate risk occurs when there is a mismatch between the interest rates of the Company's assets and liabilities. The interest rate applied on the Loan Agreement is fixed at 2% whereas the interest rate applied on the ZDP Shares is fixed at 5%. The net exposure to interest risk is reduced as a result of the Undertaking by RDLF whereby at any time up to or immediately prior to the ZDP Repayment Date, RDLF will subscribe for such number of ordinary shares in the Company as is necessary to provide the Company (after taking into account the repayment of the loan) with sufficient funds to meet the repayment obligations in respect of the ZDP Shares. Assuming the interest rate applied on the Loan Agreement is 5%, the investment income for the year would have been higher by GBP 693,426 (31 December 2017: GBP 898,163).

Fair value estimation                                                                                                                          

The fair values of cash and cash equivalents, prepayments, and accrued expenses and other liabilities are estimated to be approximately equal to their carrying values due to their short-term nature. The fair values for the loan and receivables and ZDP Shares are disclosed in this note for disclosure purposes only under IFRS 13 "Fair Value Measurement" ("IFRS 13").

The Directors based the fair value of the ZDP Shares on the traded price of GBP 110.600 pence (31 December 2017: GBP 101.875 pence) per share which was observed on the London Stock Exchange on 28 June 2018 (31 December 2017: 29 December 2017) being the last observable traded price before the year end. The Loan Agreement and Undertaking expire on the same date as the ZDP Repayment Date. Due to the dependence on RDLF to repay the Loan and provide the support to meet the Company's obligation to the ZDP holders, the fair value of the Loan (including the amount receivable under the Undertaking) is estimated to be equal and opposite to the fair value of the ZDP Shares.

Fair value hierarchy                                                                                                                            

IFRS 13 defines a fair value hierarchy that prioritises the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets and liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).

The three levels of fair value hierarchy under IFRS 13 are as follows:

Level 1: Inputs that reflect unadjusted quoted prices in active markets for identical assets and liabilities at the valuation date;

Level 2: Inputs other than quoted prices included in Level 1 that are observable for the assets or liability either directly (as prices) or indirectly (derived from prices), including inputs from markets that are not considered to be active; and

Level 3: Inputs that are not based upon observable market data.

However, the determination of what constitutes "observable" requires significant judgement by the Directors. The Directors consider observable data to be market data which is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, provided by multiple independent sources that are actively involved in the relevant market.

The categorisation of a financial instrument within the hierarchy is based upon the pricing transparency of the financial instruments and does not necessarily correspond to the Company's perceived risk inherent in such financial instruments.

The ZDP Shares are classified within Level 1 of the fair value hierarchy on the basis that the fair value was derived from an observable traded price. The Loan and receivables is classified within Level 2 of the fair value hierarchy on the basis that the fair value of the Loan has been determined directly from the fair value of the ZDP Shares.

The following tables include the fair value hierarchy of the Company's financial assets and liabilities not measured at fair value but for which fair value is disclosed:

As at 30 June 2018 (Unaudited):

 

Fair value

(GBP)

(GBP)

(GBP)

(GBP)

 

Level 1

Level 2

Level 3

Total

Loan and receivable

-

58,618,000

-

58,618,000

 

 

 

 

 

Zero Dividend Preference Shares

58,618,000

-

-

58,618,000

 

As at 31 December 2017 (Audited):

Fair value

(GBP)

(GBP)

(GBP)

(GBP)

 

Level 1

Level 2

Level 3

Total

Loan and receivable

-

53,993,750

-

53,993,750

 

 

 

 

 

Zero Dividend Preference Shares

53,993,750

-

-

53,993,750

 

9.   BASIC AND DILUTED LOSS PER ORDINARY SHARE

The calculation of loss per share is based on the net loss for the year of GBP 1,042,052 (31 December 2017: GBP 2,037,983) and on a weighted average number of shares of 50,000 Ordinary Shares.

10. ULTIMATE CONTROLLING PARTY

The voting rights in the Company are wholly owned by Ranger Direct Lending Fund Plc, a company incorporated and registered in England and Wales, and is therefore the immediate and ultimate controlling party.

11. RELATED PARTIES

During the year and pursuant to the Deed of Undertaking, the parent company contributed GBP 41,792 (31 December 2017: GBP 175,280) to the Company.

On 25 July 2016, the Company entered into a Loan Agreement and Undertaking with its parent company which are disclosed in more detail in note 3.

The Company had no employees for the period ended 30 June 2018 (31 December 2017: none).

The Directors received no remuneration for their services to the Company during the period and prior period.

12. AUDITOR'S REMUNERATION

The analysis of the auditor's remuneration is as follows:

 

 

(Unaudited)

(Audited)

 

30 June 2018

1 Jan to 31 Dec 2018

 

(GBP)

(GBP)

Audit fees for the audit of the Company's financial statements

10,400

24,960

Non-audit fees related to corporate financial services charged to Zero Dividend

-

12,800

 

10,400

37,760

 

13. OPERATING SEGMENTS

Geographical information

The Company is managed as a single asset management business, being the provision of a loan to RDLF from the Company's ZDP Shares proceeds.

The chief operating decision maker is the Board of Directors. Under IFRS 8 the Company is required to disclose the geographical location of revenue and amounts of non-current assets other than financial instruments.

Revenues

All of the Company's revenue is generated from the UK.

Non-current assets

The Company does not have non-current assets other than its loans and receivables.

14. SUBSEQUENT EVENTS

There are no subsequent events that require disclosure in these financial statements.

COMPANY INFORMATION

Directors Jonathan Schneider Brendan Hawthorne (from 26 July 2018)

Christopher Waldron (resigned 19 June 2018) Matthew Mulford (resigned 19 June 2018)

Company Secretary

Link Company Matters Limited

The Registry

34 Beckenham Road

Beckenham

Kent BR3 4TU

United Kingdom

Registrar

Link Asset Services

The Registry

34 Beckenham Road

Beckenham

Kent BR3 4TU

United Kingdom

Auditor

Deloitte LLP

Chartered Accountants and Statutory Auditor

2 New Street Square

London EC4A 3BZ

United Kingdom

Company website

www.rangerdirectlending.uk/ranger-direct-lending-zdp-plc/

Registered Office 6 Floor, 65 Gresham Street, London, United Kingdom EC2V 7NQ

Broker

Liberum Capital Limited

Level 12, Ropemaker Place

25 Ropemaker Street

London EC2Y 9LY

United Kingdom Administrator

Sanne Fiduciary Services Limited

IFC 5 St. Helier Jersey JE1 1ST English and US Securities Law Legal Adviser

Travers Smith LLP

10 Snow Hill

London EC1A 2AL United Kingdom

 

               

                LEI: 5493009K2K3DB5ZTBD75

 

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
 
END
 
 
IR SEMFULFASESU

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